So, maybe this is suprising, but I don't have any credit card debt. Now, that's not technically a true statement, but functionally it's true. Let's just say, I don't have any credit card debt I intend on paying. I suppose that sounds scandalous. Probably a lot of people would call me a dead-beat. And I guess I was at one point, but at this point in time I'm making a practical decision regarding my credit report.
I'll give you a little run down of my credit history. And honestly, looking at it now it's not as bad as I thought it was then. At least when measured against the experience of other credit card users at the age of 20.
I started out with credit cards like a lot of people do: I got a pre-approved offer my freshman year of college. I think I took one of the first ones I got and opened an account to pay the last bit of my tuition and get some books. Now I probably didn't need to do that in hindsight (I did have a job and was getting scholarships and loans), but at the time I didn't have the spending skills I have now and I thought I needed the extra help. At around a 21% interest rate. Awesome.
It's hard to remember how the next two years went down. I know that I continued to work, my credit limit was only $300, and I don't think I bought anything major. I did go out to eat a lot, it was college. At some point I got two other credit cards. A Discover card with $1000 limit, and a capital one with a $300 limit. When I think about it now, I don't think my problem was overspending, it was paying on time. If you know me, you know I can be forgetful about this stuff. Dates pass me by. This is the first time in my life I'm using a planner, and really I only use it for a few things. So I got trapped in a bad little spiral of late payments, increasing interest rates, guilt, finance charges, and late fee compounded on late fees. Oh, and more serious guilt. In the end it probably only ever got to $3000 total. And that's a liberal estimate. Considering that most people end up with between 8 and 10 grand, I actually made it off a little easy.
By the time I was 21 I wasn't using credit cards for anything (I was maxed out and my credit rating was probably so shot I wouldn't be able to get another card even if I wanted one). But I was also getting calls from my creditors. With help from a generous Christmas gift from my parents I paid down my two smaller cards and just had the Discover bill left. I worked out a payment plan with them (their customer service at the time was actually very easy to deal with and they were more accomodating than I thought they would be) and paid off my balance.
Then there was one last thing, I had a big veternary bill that I couldn't pay cash. I used the Capital One and slipped right back into my little spiral. Now, remember the limit on that card was $300. I probably charged around $250 for the vet. At the last time they tried to collect on me that total had grown to about $1500. I know that's how it works, but some part of me still feels like it's ridiculous. It's functionally a 400% interest rate.
So here we are. That $1500 was charged off as bad debt in 2003 (If you're unfamiliar with the term, when a lender charges off your debt they've taken it off their balance sheets and will no longer collect on it. At least this is what it meant in my case, I think sometimes they will take you to court to try to get it, but perhaps that's before they charge it off). In the law of credit reports, that means it will cease to be reported against me at the end of 2010. In one of the stupid laws of credit collection, if I were to call them today and pay it off, it would be reported on my credit as a delinquent account for 7 more years.
So, we have arrived at my current decision. This is the only bad debt that I still have, and it is better for me to ignore it than to pay it. I've lived with bad credit for enough time as it is.
In slightly related news, this article really makes a good case for how despicable credit companies really are.
You all know that nobody is responsible for the credit card debt of a dead person, right? Pass it on to your grandparents.
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Note that any assets in the decedent's estate can be diverted to pay their creditors. i.e. if you die owing $10,000 and have $10,000 in the bank you want to leave to your grandkids, too bad, the creditors get first crack.
ReplyDeleteBut if you have only $5,000 in the bank and owe $10,000, the creditors are only entitled to the $5000. It's totally horrible and manipulative and unethical (although, sadly, legal) for them to come after the heirs.
At some point, you may want to consider donating that $250 to a credit counseling nonprofit. There's a karmic scale somewhere in need of balance.
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